7 Tips For Raising Financially Savvy Children No Matter What Your Income Is

by Laura R. Knolle, MS, CFP®

Children learn by doing. So take as many opportunities as possible to help your children earn money, save money and spend money (responsibly).

What's the end goal?

By high school graduation your children should be managing their own money.

They should have a checking and savings account with a debit card attached, a low limit emergency credit card and be comfortable living within their means.

Here are seven ways to make this happen:

1. Allowance

Allowance gives children real-life experiences with money -- they learn how to save and spend.

Consider paying a weekly allowance and let your child earn more than it by helping with tasks or chores. You want the amount to be fair, but don't be overly generous and discourage other means of earning money.

Require some portion of their allowance to be saved.

It's helpful for your kids to see their money grow. One idea is setting up three separate jars for allowance or any other money received.

Set a household goal to put 10 percent into savings, 10 percent for charity and the rest for spending.

Allow your children to request raises on their allowance specific times a year and teach them how to request a raise.

This is a great lesson for them to learn early so when they're older they'll feel comfortable asking for a raise from their employer.

2. Needs vs. Wants

Play games with your children to learn the difference between "need" and "want."

This is a good practice for adults too.

We all have a tendency to say “I need this, or I need that,” when really they're wants. Be aware when you say these things around your children.

3. Budgeting Money

Don't we all need to do a better job budgeting regardless of our age?

Create a weekly or monthly budget for your child's needs, wants and savings.

If they bring in $10 a week from allowance and want to buy two items such as a new shirt for $30 (need) and a new toy for $20 (want), how many weeks will it take them to have enough money?

If they have a desire to have the items, let them know what they can do to earn more.

4. Earning Money

Encourage your child to think of creative ways to earn money outside of an allowance.

They can help neighbors with chores, or try tutoring or babysitting.

If you have any seniors in your community they may welcome having someone help with yard work or other projects, too.

Make sure to encourage their entrepreneurial spirit, like having a lemonade stand or being a dog walker.

5. Make Savings A Habit

A good rule of thumb for everyone is to pay yourself first. Teach your kids to save first, not last.

Give them extra encouragement by offering to match their savings dollar for dollar.

Saving is a learned skill, so share your own savings goals with your kids so they can see how committed to doing this you are, too.

It's encouraging to see this amount grow so help them regularly check their savings jar (or account) to see how much they've saved.

As your children get older, take them to the bank to open checking and savings accounts.

Most banking is done online these days, so it's important for them to visit a bank and see how it really works.

6. Debit And Credit Cards

Explain the difference between a debit card and a credit card: A debit card allows you to spend money you've already deposited, and a credit card allows you to borrow money.

If your child has a checking account, get a debit card tied to their account and teach them how to use it and review their balance to avoid overdrawing their account.

Don't shy away from credit cards, it's better to teach your kids how to use them versus avoiding them. Open a low level credit card for emergencies.

Teach your child how interest charges work and the importance of paying off a balance in full and on time.

7. Tracking expenses

Work with your child to budget for large purchases like school clothes, and decide in advance how much they can spend.

For younger children, create a list of school clothes needed and explain how to stick to the list.

For 6th and 7th graders, go with them to purchase the items but allow them to make more choices on their own and practice staying in budget.

For 8th graders and older, consider letting them go to the store on their own with their list, budget and debit or credit card, or cash.

If they come back with only one pair of jeans and no money left in their budget, give them a consequence.

Remember, these ideas are just a guide and every child is different.

There will be fits and starts to financial literacy, but stay consistent and work together as a family.